Investment Execution Scale Sees Significant Decline

The investment execution scale of institutional private equity funds (PEFs) at the end of last year marked a stark 25.8% decrease to 24.1 trillion won (approximately $17.2 billion), compared to the previous year. This downturn is largely attributed to the global economic slowdown and a stagnant mergers and acquisitions (M&A) market.

Market Polarization Amid Growth

Despite the overall decrease in investment execution, the number of institutional PEFs saw an increase of 11, reaching 1,137, with committed capital rising by 12.6% to 153.6 trillion won. The executed amount also saw an 18.8% increase to 117.5 trillion won, indicating a market that's growing externally but facing internal polarization as preference for large asset management companies intensifies.

Challenges for Small and Medium-Sized Funds

The Financial Supervisory Service (FSS) highlights the challenges faced by small and medium-sized funds, with the number of institutional PEF general partners (GPs) increasing by 15 to 437. The market sees a deceleration in growth trends, with new investment execution decreasing amidst global economic uncertainties.

Shift in Investment Focus

Investment execution was heavily concentrated in five industries, with manufacturing taking the lion's share. Notably, the sewage, waste treatment, and regeneration industry saw a dramatic 450% surge in investment, from 600 billion won to 3.3 trillion won.

The FSS warns of intensified competition among small and medium-sized GPs with insufficient track records, as institutional investors adopt a more conservative stance in the face of ongoing economic recession and heightened uncertainty.